Question
On 31 December 2015 the end of the reporting period, P Ltd holds an interest of 80% in S Ltd. On 2 January 2015, P Ltd sold certain equipment which originally cost R10 000 to S Ltd for R15 000.S Ltd recognises depreciation on this equipment on a straight line basis at a rate of 20% per annum. The portion of unrealized intragroup profit realized by the depreciation process during 2015 will be?
Select one:
a. R1 000
b. R2 000
c. R3 000
d. R5 000
Select one:
a. R1 000
b. R2 000
c. R3 000
d. R5 000
Answers
GPT 3.5
The portion of unrealized intragroup profit realized by the depreciation process during 2015 can be calculated as follows:
Original cost of equipment sold = R10,000
Selling price of equipment = R15,000
Profit on sale = Selling price - Original cost = R15,000 - R10,000 = R5,000
P Ltd holds an interest of 80% in S Ltd, so the portion of unrealized intragroup profit that S Ltd recognizes is 80% of R5,000.
Portion of unrealized intragroup profit realized by the depreciation process during 2015 = 80% of R5,000 = R4,000
Therefore, the answer is not available in the given options.
Original cost of equipment sold = R10,000
Selling price of equipment = R15,000
Profit on sale = Selling price - Original cost = R15,000 - R10,000 = R5,000
P Ltd holds an interest of 80% in S Ltd, so the portion of unrealized intragroup profit that S Ltd recognizes is 80% of R5,000.
Portion of unrealized intragroup profit realized by the depreciation process during 2015 = 80% of R5,000 = R4,000
Therefore, the answer is not available in the given options.